Solve Problem 2.21 using an annual cost analysis instead of a present worth analysis.

Problem 2.21

A pipeline engineer is considering alternative natural gas pipeline routings. The first route is mostly over land and the second is primarily undersea. Both pipelines will need some valve and fitting replacements in year 25. Cost data for each route is shown in Table P2.21. Notice that the undersea route has a higher initial cost due to higher installation costs and extra corrosion protection for the pipeline. However, the undersea route has cheaper security and maintenance costs which substantially reduces annual costs. The MARR for the project is 15%.
Determine which route should be pursued based on a present worth analysis.

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TABLE P2.21 Pipeline Cost Data Parameter Initial cost Expected life Valve and fitting replacement in year 25 Annual operating and security cost Over Land $215M 50 $30M $22M Undersea $350M 50 yr $70M $2M